BLOG

Looking Ahead for 2019

January 11, 2019

Looking Ahead:

What’s the Market Got Planned for 2019?

With 2019 right around the corner, one of the topics you’ll start seeing all over the financial blogosphere is predictions about the market’s future patterns. The current mood most seem to be in is that 2019 will have us in a gradual downturn. In other words, while you won’t see an overnight crash or anything cataclysmic, you’ll likely get to the end of 2019 and notice that over time your accounts did take somewhat of a hit.

Yield Curve

One phrase you might be seeing thrown around as the reason for this economic slowdown is something called the Yield Curve. In layman’s terms, the Yield Curve is a graph that measures the risk of the bond market. Typically, it’s the 2 year and 10 year rate that get the most attention, as right now we’re seeing an inversion between 1-5 years. You can actually go and see what the national Yield Curve is every day: if you like numbers, it might be your kind of thing as the government doesn’t make the Yield Curve easy to understand for the average person.

What’s the Yield Curve got to do with you? At first glance, you might think not a lot—but the Yield Curve helps to determine future interest rates and predict overall economic activity. When all is well in Yield Curve land, you’ll see that long-term bonds are paying out more compared to short-term ones. Right now, we’re in what’s known as the Inverted Yield Curve. Another way to think of it is a long-lasting “Opposite Day” for bonds, as short-term bonds start paying out at a higher rate compared to long-term. Many are worried that if this continues to play out in the coming year we may be in for another recession, as the last 7 Inverted Yield Curves occurred right before a recession hit.

Inflation and Volatility

If you get stuck reading doom-and-gloom articles online, it’s hard to pinpoint what you really need to worry about for the coming year. The good news? Instead of trying to juggle a million different financial points in your head when trying to plan for a potential recession, we can narrow it down to two core ideas for the time being:

Market volatility is likely not the biggest worry retirees face; the true thing to be on the lookout for is inflation. This is the subtle demon that can erode the value of your nest egg over many years, especially if you keep your money in low-yielding deposit accounts. Stocks have an excellent record of outpacing inflation over the decades. In contrast, savers clinging to ultraconservative tools are highly exposed to inflationary goblins.

Volatility is also not your worse enemy—sometimes it can even be your ally! It’s easy to forget that market volatility is a normal part of the cycle and that, over the years, the appreciation potential of stocks has greatly overshadowed the losses. It’s also easy to forget that volatility can be a benefit, such as for investors who utilize dollar-cost average and rebalance their holdings. Hardly anyone has all their money in the stock market, so periods of softness provide an opportunity to buy shares more cheaply.

What can you do?

Anyone who has been in the market for a while can tell you there are highs and lows, as that’s the nature of the beast. The important thing to remember is to not let yourself be bogged down by grim forecasts. Make sure you’re meeting with your advisor to keep your plan as up-to-date as possible and realize that bad years are guaranteed to happen, just as good years are guaranteed to follow. If you’re unsure if your plan is ready to handle whatever 2019 might throw it’s way, feel free to give us a call for a free consultation and review of your current financial plan.

Mercurio Wealth Advisors is a registered investment advisory firm located in Louisville, Kentucky. Mercurio Wealth Advisors may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Mercurio Wealth Advisors’ web site is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of Mercurio Wealth Advisors’ web site on the Internet should not be construed by any consumer and/or prospective client as Mercurio Wealth Advisors’ solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Any subsequent, direct communication by Mercurio Wealth Advisors with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Mercurio Wealth Advisors, please contact the state securities regulators for those states in which Mercurio Wealth Advisors maintains a registration filing. A copy of Mercurio Wealth Advisors’ current written disclosure statement discussing Mercurio Wealth Advisors’ business operations, services, and fees is available at the SEC’s investment adviser public information website – www.adviserinfo.sec.gov or from Mercurio Wealth Advisors upon written request. Mercurio Wealth Advisors does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Mercurio Wealth Advisors’ web site or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

This website and information are provided for guidance and information purposes only. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy. This website and information are not intended to provide investment, tax, or legal advice.

Insurance products and services are offered and sold through Mercurio Insurance Services and individually licensed and appointed insurance agents.

*Guarantees provided by insurance products are backed by the claims-paying ability of the issuing carrier.

The retirement kit is provided for informational purposes only. It is not intended to provide tax or legal advice. By requesting this report, you may be provided with information regarding the purchase of insurance and investment products in the future.

The generalized information we provide regarding tax minimization planning is not intended to, and cannot, be used by anyone to avoid paying federal, state, or local municipality taxes or penalties. You should seek advice based on your particular circumstances from an independent tax advisor as tax laws are subject to interpretation and legislative change and are unique to every specific taxpayer’s particular set of facts and circumstances.